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Editor’s blogOctober 11 2013

Making a show of crisis management

While the likelihood of a US default remains low, banks are still having to go to great lengths to show that they are prepared for a possible default scenario.
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The US's Republicans may have succeeded in shutting down the US government and sending thousands of employees home, but for many bankers their workload has increased. The chances of a US default may be low but every bank still needs a strategy to deal with the fallout if it does happen. With all the post-crisis emphasis on risk management and scenario testing, imagine the criticism a bank would receive if it was unprepared for the possibility of the debt ceiling not getting raised on October 17.

While shutting down the government is contradictory from an economic viewpoint, and so rather suiting the fiscally conservative Republicans who determined it, could the impact be offset by the bankers' extra workload, considering the additional man hours involved and disposable income generated (except that government employees are more likely to spend it and bankers more likely to save it)?

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